“De-rating catalysts are expected from the start of operations by TPG or any insight into its tariff
plans and strategy,” the brokerage said in a note dated Tuesday.

Singapore’s wireless service revenue in 2017 was S$4 billion, Maybank KimEng noted, adding that if it were to erode by 10 percent a year over five years, that would translate to approximately S$1.6 billion of potential lost revenue for incumbents.

To be sure, in what it called a “live-and-let-live” scenario, Maybank KimEng said it was currently assuming TPG will erode incumbents’ wireless revenue, but not necessarily by double-digits. It estimated a 2-4 percent fall over 2017-19.

‘Take it out of the market’

However, concerns over a worse-case scenario of TPG accelerating its rollout and making an aggressive grab for market share could tempt existing players to “take it out of the market,” the note said.

The brokerage pointed to the Philippines, when the prospect of a prospect of a potential competitor pushed PLDT to acquire it before it even started commercial operations.

The potential lost revenue in Singapore in the 10 percent scenario is higher than TPG’s spectrum costs and capex budget of S$300 million, the brokerage noted.

“Theoretically, somewhere between its costs and the industry’s destruction value is a price an incumbent could pay for an acquisition or merger to stem revenue losses,” Maybank KimEng said.

It kept a Negative view on the sector. It rates Singtel at Hold, with a S$3.69 target, and StarHub and M1 at Sell, with S$2.46 and S$1.79 targets respectively.

Singtel ended Wednesday down 0.29 percent at S$3.40, StarHub was off 0.41 percent at S$2.43 and M1 ended at S$1.78.